States Prove Weak Link in Supporting Research Universities

In a Q&A, historian Robert M. Berdahl, president of the Association of American Universities, (since retired) describes how fiscal pressures at the state level undermine research universities already battered by the recession.

Q: Are universities in crisis today? How big a crisis are we in now? Is it mostly cyclical, or is it structural? What lasting impact is it likely to have and does it alter in any significant way, the model that then-Director of the Office of Scientific Research and Development Vannevar Bush envisioned in his seminal 1945 paper, "Science, the Endless Frontier," the basis for our research university system?

A: Clearly, this is the deepest crisis that we've faced since the Great Depression. I think it's more than just a cyclical downturn. I'm not an economist, so I really can't comment on all the aspects of it, but certainly there are some structural issues with the fact that we are witnessing several things at the same time. One is the greatest disparity of income in the United States since the 1920s and the fact that the median income has remained absolutely flat or is going down in the last decade. And I think that that has not only created a revenue problem for states, especially in this recession, but it's also created a real source of anxiety among the middle class in the United States — the feeling that this is the first generation, perhaps, whose children will have a harder time of it than the previous generation. So, I think that all of those sorts of attitudes and emotions are feeding into a belief that retrenchment is necessary, reductions in budgets are necessary because of shortfalls in revenues. And we're seeing very deep cuts in the universities.

The University of California has just taken another $500 million hit on top of very, very serious reductions in the last two years. And the result is an increase of the tuition in order to try to keep the operation somewhat on balance, and that just feeds into the fear and anxiety that people have.

Q: So what do you think this is likely to mean for, say, the research enterprise of major research universities?

A: I think most of them are working very hard to keep their quality high, their research attractiveness and investment as stable as possible. Of course, we've had the benefit of stimulus money over the past year. That's going to disappear. So, I think we're going to see a reduction in the availability of research dollars unless Congress gives high priority, as some are advocating, for continued investment in education and research while we're having to cut other portions of the discretionary budget.

A lot depends, it seems to me, on whether or not the country is willing to continue to try to invest in research and to sustain a relatively high level of that going forward.

Q: You don't see any sort of fundamental change to the model envisioned by Vannevar Bush?

A: If you go back and read Vannevar Bush, he basically said it's the federal government's responsibility to invest in basic research. That will, he argued, provide for economic growth. It will provide for national security. It will provide for the greater health of the nation. He argued very strenuously for the federal government having a responsibility, but the states have a responsibility for maintaining the basic quality and infrastructure of the university, so that research [funding] comes in from the federal level on top of a base that is provided by either endowments, in the case of private universities, or is state-supported, in the case of public universities. The threat to the Vannevar Bush vision, it seems to me, comes from the fact that the states are not meeting their part of that partnership.

Obviously, other priorities and other mandatory spending have eroded state support, so we know that the percentage of state revenues going into universities has fallen from about 13 percent 20 years ago to about 11 percent now. That constitutes a considerable amount of money — and at a time when enrollments at public universities have gone up. So, the number of dollars per student going in to our public universities has declined, and in the last couple of years that declined pretty sharply.

Q: But considering the tremendous overhang in unfunded liabilities that states carry — it's estimated to be between $1 trillion and $3 trillion — aren't they the weak leg of the tripod?

A: Yes. I think that the burdens of Medicaid, of corrections, of the unfunded pension liabilities that states have — all of those things have, I think, created the weak link, because those are all mandatory expenditures, or have been seen as mandatory expenditures, along with a great increase in the portion of state dollars going into elementary and secondary education, so that higher education is really the portion of discretionary spending that gets cut.

Q: So that means decaying infrastructure, labs that are not up to state-of-the-art standards?

A: Yes, I think it means all of those things. And it also means that the universities are going to be increasingly dependent upon and seeking private support. And the public universities, especially the research universities, are going to be much less public in the sources of their funding in the future and will resemble increasingly private universities that are tuition dependent, dependent upon private gifts and so forth.

Q: I wonder how significant a transition or a transformation can be expected and what are the consequences of that?

A: Well, I think the consequences are a real threat to access especially for middle-class students. There is a good deal of financial aid for the poor students. But for students whose families have lost ground in terms of income, who have lost home equity money, who may have one or both members, or both wage-earners, unemployed — for the middle class I think it's real scary simply because they see the cost of attending a high-quality institution gradually getting out of reach.

I think that you will also see, and I think you should see, greater pressure on states that contribute such a small percentage of the overall budget of a public university [but yet are] still controlling so much of it. I believe you will see more and more things like the proposal in Oregon, for example, to essentially transform the nature of the university. Transform the state contribution into a bond payment scheme that would lay the foundation for half an endowment of about $1.6 billion, and simultaneously change some of the government structure of the university to make it more resemble a private university. So, turning public universities into quasi-public institutions I think is one of the consequences. And I think that that has certainly really disturbing consequences, like that of access.

Q: Any others?

A: I think that's the primary one. Whether or not universities see themselves as centrally serving the public interests is another consideration that has to be faced — if they become increasingly private, what about their service-to-the-state component? They have historically been of great service to the states. We are in what I think to be a real transition. We've done a lot of soul searching about what it mean that these universities are probably going to undergo this kind of transformation.

Q: So, does that suggest an even more urgent need for access [to higher education], when it is becoming more restrictive?

A: Yes, and if you look at the polls, the public recognition of the importance of obtaining higher education has increased, and, at the same time, people are less certain that their children will be able to obtain it. So, that's the crunch.

Q: You have mentioned in your writings this erosion of higher education as a public good, that it is becoming a private good rather than a public good. I wonder, do you think that's going to be a political issue?

A: Well, yes. I think the problem is it hasn't been a political issue. ... There has been really almost a watershed transformation in this country over the last 30 years about investment in public goods. And it isn't just universities; it has to do with the entire infrastructure of the country, of which education is one important component. But the resistance to investment in public goods, I think, has been carried out without a real consideration of what the consequences are. There has been the triumph of a belief that the market is the solution to most issues of distribution. And obviously universities become a part of that as they become much more market oriented and more market driven.

Q: So, assuming there's not a great change and this transition continues, it sounds like we could wake up in 15, 20 years and find out that if we thought we sort of had an underclass, we're certainly going to have a much larger one by then.

A: I think that's absolutely true. I mean you should look at some of the studies, like the book by Paul Pierson and Jacob Hacker called Winner Take All Politics, which really lays out the way in which our policies, as a country — tax policies, distribution policies — have exacerbated, or created, this huge gap between rich and poor where the bottom 40 percent of the population have seen virtually no income gains over the last 30 years and the top 20 percent with substantial gains in real income, and the top 1 percent with something like 250 percent gains. We now have less social mobility than most other developed countries in the world — that's been documented. We have greater income disparity than most of the developed countries of the world. That, I think, is very unhealthy for a democratic society and for one that really needs to have a broadly educated populace in a knowledge-based economy.

Q: How well articulated are these concerns by university presidents as a community. And are you at all hamstrung in this? I don't know how vocal you've been about this.

A: I've spoken up about it in a number of circles, most recently at the American Historical Association meeting. And obviously I think university presidents are somewhat concerned about it, but there is a heavy focus [elsewhere], quite naturally, when you're in the midst of a crisis. If you're on the Titanic, and it's kind of going down, you are a little bit less worried about future shipping. That's where, I think, university presidents are. They're just grappling with the day-to-day, year-to-year crisis. And I think they recognize some of the long-term problems this is creating, but the day-to-day, year-to-year crisis is so preoccupying.

It's hard to necessarily articulate the larger vision, although I think most do, and most recognize that this could create terrific long-term problems for the country, especially when the international competition is growing. We are not going to be able to have a monopoly on graduate education as we have had in years past, where this was the destination point for graduate students from all over the world. As Chinese and Indian universities become much more competitive, students will be staying there, and that has been a source of great innovation and new blood coming into the system in the United States.

Q: Innovation and new blood. Also revenue.

A: Yes. If you look at Silicon Valley, for example, a huge percentage of the firms founded in Silicon Valley in the last 30 years have been founded by people who came from abroad to study at American universities.

Q: How much diversity do you expect to see in the way states handle things? Oregon is a pretty liberal state but aren't we likely to see a more variegated system where some states are actually more committed to maintaining open access than others? Does that really matter?

A: I think one of the difficulties that we have as a nation is that we have a very decentralized system of higher education and of universities. I mean we have freestanding, autonomous private universities, and we have public universities that are all state-based. It becomes very difficult to [make adjustments] in the face of, say, international competition, where you have much more centralized planning in China or even in India than you have here. It's not that I'm advocating centralized planning, but it's much more difficult for us to develop a strategic response, simply because we're dependent on 50 independent states, and thus, to develop a coordinated response as a nation is very, very difficult. The only response that the federal government can really provide is to continue funding the research component and the student aid component in order to keep both the research engine going, and to keep access to higher education available to a broad spectrum of the population. Both of those things, however, do depend on some policy from the states that make that investment, either in research or student aid pay-off, by maintaining their facilities and maintaining their institutions.

The states have always differed. California has historically always been a low-tuition state. Thirty or 40 years ago, tuition at the University of California was negligible - probably less than $1,000 a year, now it's $11,000 for in-state students, and it's going to go up another 8 to 10 percent this year. So, we're seeing annual increases in tuition at public universities that are the equivalent of what the total tuition was 30 and 35 years ago.

Q: If there were a strategic response, what would that look like?

A: I hope that the National Academy of Study, or research universities, will begin to address it. It would begin with a recognition that graduate education is much more of a national responsibility than a state responsibility. State legislatures are interested in seeing to it that their undergraduates in the state get access to education; that's their obligation. They're less concerned about graduate students, because they see graduate students as coming from out of state and leaving to go out of state in many cases.

Q: That sounds like more money. Is that realistic?

A: I don't know how realistic it is — it certainly isn't going to happen right away. I think that the federal government could also create incentives for states, either through state matches or some kind of program that would incentivize states to sustain their investment in their universities.

Q: Currently you're talking about support even to graduate students?

A: Yes. The first thing is for the federal government to recognize it has a responsibility here, and the second thing is that it needs to create opportunities and incentives. Canada, for example, has created a whole host of research chairs at its provincial universities, at the various research universities — about a dozen, or 20. That has had a very, very important stimulative effect.

[In the United States] I think the federal government should also be paying the full cost. Right now universities are basically losing money on federally funded research because the overhead that they receive for federally funded research doesn't cover the cost that they incur. So an overhead policy that enables universities to recover the actual costs of the institutional investment in research would be I think an important step for the federal government.

Q: But doesn't that run against the fiscal realities that we have now?

A: Yes and no — it wouldn't happen overnight, but it could happen gradually. Our calculation is that the universities are receiving somewhere between $2.2 and $3.1 billion less than they should be receiving in indirect cost support. Over the next five years, building that base would not be astronomical for the research enterprise. It constitutes about 10 percent of the $31 billion you mentioned, little bit less than 10 percent of the whole. You couldn't do it overnight, but you could commit to a process that would actually lead to that.

Q: So, the universities are not actually losing money net, but they're not getting the full costs of research covered?

A: To some extent they're losing money. One calculation is that for every dollar of research that is conducted they're losing, 15 to 20 cents. For every grant that they accept, there's a cap on the administrative overhead. There's [also] been a huge increase in the regulatory burden. If we simply begin to review the regulatory burden that universities have incurred over the past 20 years, which is enormous, and the cost of sustaining that is enormous, and if we streamlined a lot of those regulations, eliminated the ones that are of very little value, I think you would save universities a good deal of money that they are now having to spend in compliance costs.

Q: Now you're beginning to sound like a real industry complaining about regulation. I'm sure it's true that it's burdensome, but what drove the surge in regulation over universities?

A: I think a lot of what drove it was the increase in [funding from the] National Institutes of Health, so there are regulations on human subjects, institutional review boards, etc. I remember when I was a provost, one of the fastest-growing costs was dealing with toxic materials. Well, you've got to deal with it. Another huge cost for universities is the reporting effort faculty has to do. The Federal Demonstration Project did a survey 20 years ago of how much time faculty researchers spent on research versus time that was committed to administrative work. Twenty years ago it was 19 percent. The most recent survey suggested it was 42 percent. That's a huge increase in time researchers spend on administrative tasks, and that's a result of more and more reporting requirements, more and more compliance requirements, more and more review processes within the institution. That's a real waste. ... It's costing the country a lot of research time.

Q: You've talked I think about the dangers of shifting from basic to applied research. How do you manage that? And who is doing that well? And where is it not being done so well? How worrisome is the pressure to commercialize?

A: I think we have a pretty healthy system on the whole. We've seen more transfer of technology from universities to industry since the passage of the Bayh-Dole Act. We've seen a huge number of new industries — I think something like 500 start-up companies last year had their roots in universities. So, the connection is, I think, a healthy one between industry and universities.

What I would hate to see would be more of the limited research dollars directed toward applied research because ultimately as Vannevar Bush said, it's the basic research, the fundamental research that leads to real big breakthroughs. We shouldn't be diverting significant basic research dollars toward applications, because I think we then deprive ourselves of the real seed corn of ideas.

In a Q&A session, computer scientist Francine Berman, vice president for research at Rensselaer Polytechnic Institute, explains how funding decisions made in Washington help or hinder innovation at universities.

Regarding the crisis in American research universities, Louisiana State University System President John V. Lombardi argues that when athletics are on the cutting block, he'll see that as a sign of disaster.